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GUEST COMMENT Retail must adapt to compete with the e-tail behemoths

Image: Adobe Stock

Image: Adobe Stock

It’s become a truism to say that the pandemic will have changed the way we shop forever. But the truly seismic change over the last 18 months hasn’t been in consumers’ buying behaviours; it’s been the retail industry’s realisation that its approach to e-tail (and delivery in particular) is no longer fit for purpose — if it ever was.

But the answer is out there. In fact, a handful of far-sighted brands realised it’s not enough to merely “do delivery” and have instead taken matters into their own hands and partnered with those that already have the infrastructure in place. Most recently, Boots partnered with Deliveroo to cut down delivery times and cater for the ‘always-on’ consumer. As the benefits of this approach are proven it will hopefully be the beginning of a national digital infrastructure that the industry needs to create. 

Retail’s wrong turn

For centuries, the three things that mattered most for a retail outlet were the exact same priorities for a homeowner: location, location, location. Since that’s been shifting over the last 20 years, with the most important factors becoming logistics, logistics, logistics. Get the goods to the customer with the best possible service, reliability, and above all speed.

Online-only brands were disruptors in the true sense of the world, changing long-established retail models almost overnight. Home delivery left the High Street shell-shocked. In the face of this development, traditional retailers tried to claw back market share by launching their own delivery services, but lacked the required resources to build logistics networks similar to the likes of Amazon.

One study by McKinsey shows how futile it is to compete with multinational e-tailers on delivery. Looking at the German market (where ecommerce has developed at a similar scale to the UK), McKinsey found that to serve 20 major cities with similar same-day fulfilment services to Amazon, a single retailer would need 11 new distribution centres.

It’s difficult to think of more than a handful of national retailers that could afford such massive investment. As for High Street brands with little or no tradition of delivery, it’s unthinkable. And yet what can they do to stop online giants further eroding their sales? E-tailers are the Harrods’ of our times, promising omnia omnibus unique— all things to all people — with next-day delivery thrown in. If customers can get basic items like lip gloss and shampoo delivered tomorrow morning, why would they choose to trek into town on a wet Tuesday?

It’s becoming increasingly clear that retail has made a wrong turn. To have any chance against the e-tail giants, they shouldn’t be trying to emulate their enormous logistics networks, but should instead be working as an industry to create a new national infrastructure. Thankfully, that’s exactly what some brands are starting to do.

Building a new national delivery infrastructure

When we think of retail infrastructure, we tend to picture what we can see: roads, ports, lorries, sheds. It’s much rarer to think of infrastructure in terms of relationships.

But that’s exactly where traditional retailers can find the solution to their problems. In August, Boots the Chemist announced a pilot scheme with Deliveroo to use the delivery firm’s network of moped and bicycle couriers to deliver a range of 400 health and beauty products. Customers can order cosmetics or over-the-counter medicine through the Boots app and have them delivered to their door in as little as 20 minutes.

It’s important to stress that this partnership is still at the trial stage, but it’s an illustration of how traditional retailers can immediately regain relevance to their old customers, as well as to communities where they were once a pillar of the High Street.

This new partnership between Boots and Deliveroo is an example of a ‘retail ecosystem’ where different retailers and third-party service providers collaborate to bring the customer what they need. Expectations of good service don’t change much between industries or even types of retailer: all the customer wants is speed and reliability. If a service provider has a trusted network in place and the spare capacity, retailers would be crazy not to piggyback on existing infrastructure.

What makes this model even more powerful is that it brings new life and new purpose to what was once a retailer’s most precious possession, but is now their single biggest cost: their premises.

Boots is the quintessential high street chain, with an incredibly broad footprint of stores in every city, town and large village across the UK. It understands the value of being at the centre of communities, but also that of being digital. A few years ago it launched a click-and-collect service for high-level cosmetics and other products not normally carried in their smaller community stores, for instance. But it’s not just Boots that are paving the way. Co-op and Morrisons have both partnered with Amazon in a new trial to provide same-day grocery deliveries for Prime members. Partnering with companies that were previously considered their ‘competitors’ is allowing these retailers to reach more customers and take advantage of the tech-savvy giant.

Working with a ‘last mile’ partner is the logical progression for any physical retailer with a wide footprint and whose customers are willing to pay a little extra for the convenience of home delivery.

Joining the dots

Relationships between individual retailers and delivery companies are a good start. But if the industry is to adapt as a whole, we need to create a digital infrastructure that enables any brand to start working with any delivery company or other service provider quickly and cost effectively. That means reducing any complex integration work, which can be expensive, time consuming and a barrier to progress.

Connecting systems, channels, stores, partners, and devices requires standardisation. Consistent technology and processes eliminate bottlenecks and ensure seamless connections between everything from data to devices. This kind of ecosystems needs a stable platform at its core and an easily executed API management strategy to ensure on-going integration. The ability to scale and connect systems any time in the future is crucial to the long term success of a national network.

Let’s be clear: these new partnerships are not going to change traditional retailers’ fortunes overnight. As with any national infrastructure project, it will take time (and wrong turns) before we see the emergence of a robust, reliable, and country-wide retail ecosystem. But the groundwork – both in terms of technology and the first budding relationships – is already in evidence. For the first time in decades, the future of the High Street looks bright

Author:

Oliver Guy, senior director, industry solutions at Software AG

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